A number of weeks ago John Considine wrote about the business of German football and touched on the 50+1 rule. One team showing disregard for this rule is promotion seeking Bundesliga 2 side – RB Leipzig. The German club are the latest team leveraged by energy drink brand - Red Bull, in order to increase exposure of the brand’s sports portfolio.
This is just one example of the various types of sports marketing policies implemented by Red Bull over the course of their 30-year history. Readers may be familiar with their sponsorship of football teams in New York and Austria, as well as involvement in extreme sports and Formula One racing. Does this strategy see a positive return on investment?
I decided to investigate this question as part of my undergraduate thesis.
Take RB Leipzig for example. What has the club done for the Red Bull brand? Bundesliga rules do not permit a company name to appear in a team name - hence the club is officially called RasenBall Leipzig. While promotion to the top division in Germany is the aim, Red Bull’s primary focus is increased exposure of its product.
One could argue most football clubs have a very different strategy. In recent years almost ever top club has incurred a sizeable loss each year, but the primary aim is to win trophies.
However, soccer is not the only sport Red Bull have invested in heavily, particularly since their switch from cult and extreme sports to the mainstream according to Prof. Gerd Nufer, from ESB Reutlingen.
The other big sport that most readers would be familiar with is Formula One. The sport does is very expensive to engage in, and Red Bull’s major source of revenue has come from the exposure of winning the constructor and drivers championships repeatedly. It is not measured in terms of real money, but rather by ad-equivalent – the price the brand would have to pay for similar media exposure. This came to $283.2 million in 2012. Whether the company remains in the sport is open to debate, given their recent lack of podium finishes, despite investing over a $1 billion since 2004.
A golden rule to measure sponsorship is that for every 4 euro a sponsor invests, they should receive 5 euro back. Ferrell, Lucas and Niininen (2014) state that for every euro Red Bull invest, they are gaining 3 euro back. There is more to take into account in the overall measuring of the sustainability of Red Bull’s Sports Marketing model, but they definitely provide a model, that others could learn from.
(Mark can be contacted directly firstname.lastname@example.org).